David Cameron is hitting back against the "entitlement culture", which has gravely undermined a sense of "collective responsibility" that used to be so strong. It is at the heart of the 'big society' project to rejuvenate civil society. It is also absolutely spot on. If the state constantly intervenes in our lives instead of allowing us to live as individuals and communities, taking responsibility for our own actions, then it creates a client state of automatons.

There is already a 'welfare gap' between those who choose not to work and those who work and save for their family's future. This is not because everyone on benefits is workshy but because of the perverse incentives produced by an overcomplicated system which simply isn't working.

David Cameron is entering a potentially transformative phase in his premiership. This is not the end of 'compassionate conservatism', rather it is a reaffirmation of it. Instead of the lazy assumption that poverty is a problem solved by income redistribution, we are offered a more nuanced understanding. Mr Cameron highlighted the real causes of poverty, such as drug addiction, family breakdown, poor education and debt. Most importantly, he articulated the most effective solution to the problem:

"Compassion isn't measured out in benefit cheques - it's in the chances you give people...the chance to get a job, to get on, to get that sense of achievement that only comes from doing a hard day's work for a proper day's pay.

That's what our reforms are all about. Transforming lives. Helping people walk taller."

Elsewhere in the speech, the 'Wisconsin model' established during President Clinton's administration in the US offered some inspiration: it proposes a two-year time limit on benefits, and for people receiving benefits to carry out full-time community work.

Mr Cameron also spoke about how couples on benefits were having children they obviously could not afford without state support. He proposed that income support should be stopped and additional child benefit limited for families with more than three children. Tougher measures on housing were also mooted, such as lowering the housing benefit cap further and stopping it completely for under-25s.

Deeper cuts to welfare budgets should not come as a surprise. George Osborne has already announced, in last year's Autumn Statement, two more years of cuts and, in his Budget speech this year, the need for £10 billion of further savings from welfare by 2016 (to be outlined in the next Spending Review).

Political considerations are crucial. Downing Street's director of strategy, Andrew Cooper, is largely responsible for the policy - his polling research showing that the benefit cap was among the Government's more popular policies. It can prove how welfare reform is a 'wedge issue' on which both the Lib Dems and Labour are viewed as out of touch with the 'striving classes'. Tougher welfare reform has now become the centrepiece of Conservative differentiation.

David Cameron has crafted a long-term vision for welfare reform that extends beyond this Parliament and establishes the groundwork for the Conservative party's general election campaign in 2015. Undoubtedly his thinking is correct and needed but it should be some cause for concern that the coalition partners are distancing themselves to such an extent three years out from that election. The coalition needs a renewed unifying mission that goes beyond deficit reduction. A new Coalition Agreement, formulated by people such as David Laws, is what is needed now, not 'differentiation'.

Mr Cameron's speech is precisely what the Conservatives need to help them win in 2015. But it may have come a bit too early.